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        <h2 class="text-3xl mb-2 font-bold">Part 1: Investment Basics</h2>
        <p class="mb-2">
            Designed to provide an introduction to the sometimes complex subject
            of managing your money. &nbsp;
        </p>

        <h4 class="text-xl font-bold my-2">Different Investments</h4>
        <p class="mb-2">
            There are three basic types of investments, also known as asset
            classes, all of which we are going to discuss. These investments are
            stocks, bonds and cash.
        </p>
        <p class="mb-2">
            You can buy stocks and bonds as individual investments, or you can
            invest in them by buying mutual funds or exchange traded funds
            (ETFs) that own stocks, bonds or a combination of the two. If you
            invest in cash, you can put money into bank accounts and money
            market mutual funds or you can buy what are known as cash
            equivalents: US Treasury bills, Certificates of Deposit and similar
            investments.
        </p>
        <p class="mb-2">
            While you may not think of bank accounts as investments because they
            currently pay such a low rate of interest, technically any time you
            use money to make more money, you are investing. On the other hand,
            stock-based vehicles have been the more profitable investment over
            time.
        </p>
        <h4 class="text-xl font-bold my-2">Stock Overview</h4>
        <p class="mb-2">
            Buying stock makes you a part owner of the corporation that issued
            the stock. In the past, stocks have offered one of the greatest
            long-term investment returns, in large part because of the strength
            of the US economy which has been reflected in the growth of US
            corporations and the price appreciation of corporate stocks.
        </p>
        <p class="mb-2">
            When a company prospers, investors who own its stock can make money
            in two ways:
        </p>
        <ul class="mb-2 pl-2 mx-4 list-disc">
            <li class="mb-2">
                Current income, if the company pays part of its earnings to
                shareholders as dividends;
            </li>
            <li class="mb-2">Capital appreciation, if the price of its shares increases.</li>
        </ul>
        <p class="mb-2">
            Since there is no limit as to how much a company can earn or how
            high its stock price can go, there is no limit as to how much return
            a stock investment can provide. Similarly, there is no limit as to
            how long you can own a stock and continue to benefit from its
            increasing value either through dividend income or price
            appreciation. You might also think about stocks as a way to build
            your estate by leaving them to your heirs in your will or through a
            trust.
        </p>
        <p class="mb-2">
            Stocks, also known as equity investments because they give you
            ownership, can pose risk as well as the opportunity for profit.
            That's because their price fluctuates in response to what is
            happening in the company that issued the stock, in the industry of
            which the company is a part, and in the economy as a whole.
        </p>
        <p class="mb-2">
            If you sell a stock at a time when the stock market or an individual
            stock price is down, you might have little or no profit, and you
            could even lose some, most, or all of your principal investment.
        </p>
        <p class="mb-2"><a name="StockPrices" /></p>
        <h4 class="text-xl font-bold my-2">Stock Prices</h4>
        <p class="mb-2">
            There are two reasons why a stock's price goes up or down.
        </p>
        <p class="mb-2">
            The first is the future financial outlook of the company issuing the
            stock. If it seems likely that a company's earnings will grow at a
            healthy rate, investors will probably be willing to pay higher
            prices to own its stock. On the other hand, if it seems that the
            company is struggling to grow its sales and earnings, investors will
            be less interested in owning the stock and its price may drop or, at
            best, remain relatively stable.
        </p>
        <p class="mb-2">
            The second reason a stock's price goes up or down is related to the
            general state of the stock market. If the market is booming, stock
            prices typically go up. But if the market is falling, many stocks
            often drop in price, regardless of the future financial prospects of
            individual companies.
        </p>
        <p class="mb-2">
            While it is very difficult to anticipate the general movement of the
            stock market accurately, investors can study the market by reading
            about it in the Selection and Opinion section of The Value Line
            Investment Survey. You can study individual stocks using the
            information provided on the Value Line page. We know of no source
            that gives more concise and detailed information.
        </p>
        <p class="mb-2">
            <a name="Expectations" />
        </p>
        <h4 class="text-xl font-bold my-2">Expectations</h4>
        <p class="mb-2">
            Professional analysts and individual investors tend to change their
            expectations about individual corporate earnings in response to new
            information about the health of the economy in general.
        </p>
        <p class="mb-2">
            If investors expect boom times, they are often willing to pay
            increasingly higher prices across the board for stocks. But if they
            expect a recession to occur, they will assume that many businesses
            will suffer slowdowns and earn less money. In this case, stock
            valuations are likely to drop.
        </p>
        <p class="mb-2">
            For example, if the economy is weak and people are being laid off,
            or are afraid of being laid off, they are less likely to be buying
            new cars. So investors will lower their expectations for automakers'
            earnings. Similarly, if fewer cars are being manufactured,
            automakers will buy less steel. That means steel companies can be
            expected to earn less.
        </p>
        <p class="mb-2">How does that translate into investment decisions?</p>
        <p class="mb-2">
            In this scenario, the stock prices of automobile and steel
            manufacturing companies are likely to decline as investors shy away
            from them.
        </p>
        <p class="mb-2">
            In a serious recession, prices of stocks in vulnerable sectors will
            continue to drop and drag the entire stock market down. But in a
            more typical situation, when the price drops to a certain level,
            investors once again see the stock as a promising opportunity to
            make money and begin to buy again. A parallel situation typically
            develops with the automobiles themselves: Since they are not
            selling, the company lowers the prices. In all but the worst
            economic conditions, this encourages people to buy. An upward swing
            of the economy begins and investors who have bought stock in the
            automobile company when its price was depressed see the price, and
            their returns, begin to climb.
        </p>
        <p class="mb-2">
            Investors also know that every business is not affected equally by a
            recession. Even in a recession, people still brush their teeth. So
            the earnings of companies that manufacture toothpaste probably won't
            suffer as much during a recession as those companies in the
            automobile and steel sectors. That means that their stock prices
            aren't likely to drop as far and may even remain strong since they
            represent one place to make money unless the economy as a whole
            slips into a deep recession or a depression.
        </p>
        <p class="mb-2">
            On the other hand, when times get better, people don't brush their
            teeth any more than they did when times were bad. So unless the
            toothpaste company can introduce new products or increase the price
            of the toothpaste significantly, its earnings are not likely to
            increase in a boom period as rapidly as earnings in more cyclical
            industries.
        </p>
        <p class="mb-2">
            <a name="InterestRates" />
        </p>
        <h4 class="text-xl font-bold my-2">Interest Rates</h4>
        <p class="mb-2">
            Fluctuations in interest rates usually affect the stock market.
            That's partly because the level of interest rates affects the appeal
            of stocks versus bonds. When interest rates are high, bonds are more
            attractive relative to stocks: when interest rates are low, bonds
            become less attractive relative to stocks. But it's also because a
            change in the level of interest rates can affect corporate profits.
        </p>
        <p class="mb-2">
            Higher interest rates often mean lower profits. If interest rates
            rise, companies have to pay more to borrow the money they need to
            grow. Eventually that translates into higher prices for their goods
            and services and, often, slower sales, especially if consumers are
            buying on credit and have to pay higher interest rates themselves to
            borrow. Potential customers may decide they can't afford to buy.
        </p>
        <p class="mb-2">
            The eventual decline in corporate sales and earnings is something
            investors anticipate as soon as interest rates go up. The result is
            that stock prices may go down even before the effects of the
            increased interest rates are actually felt on the company's bottom
            line.
        </p>
        <p class="mb-2">
            The reverse happens when interest rates fall. Company borrowing
            costs are lower, so their profits on the same level of sales will be
            higher. And customers who buy on credit are more comfortable buying
            if they are paying lower rates, so they buy more. That increases
            sales and ultimately means higher corporate profits. Higher profits
            typically result in higher stock prices.
        </p>
        <p class="mb-2">
            In this situation as well, investors are usually ready to pay higher
            prices for stocks as soon as interest rates drop in anticipation of
            the cycle of increased profits.
        </p>
        <p class="mb-2">
            <a name="BondOverview" />
        </p>
        <h4 class="text-xl font-bold my-2">Bond Overview</h4>
        <p class="mb-2">
            Bonds are financial obligations of corporations, governments, or
            government agencies. The issuer usually pays periodic interest to
            the bondholder and is obligated to repay the value of the bond at a
            specified time (known as the maturity date).
        </p>
        <p class="mb-2">
            Short-term bonds normally have maturities of less than one year.
            Intermediate-term bonds normally mature in two to ten years.
            Long-term bonds normally run more than 10 years.
        </p>
        <p class="mb-2">
            Bonds are generally described as less risky investments than stocks,
            since, if you buy a bond when it is issued and hold it until it
            matures, you normally get regular income and your investment capital
            back. The risk you take—in addition to the possibility that rising
            inflation will undercut the buying power of the interest income you
            earn—is that the issuer may not be able to meet its obligation to
            pay the interest and repay the loan. This is known as credit risk.
        </p>
        <p class="mb-2">
            However, since bonds are rated by independent rating companies, you
            can buy highly rated bonds that pose virtually no danger of default.
        </p>
        <p class="mb-2">
            But bonds constantly fluctuate in value, so that if you need to
            liquidate your bond investment during its term, you might have to
            sell for less than you paid. That is known as market risk.
        </p>
        <p class="mb-2">
            Bonds are generally considered a smart way to diversify an
            investment portfolio, since in most years they perform differently
            from stocks and in some periods when stocks are depressed, bonds can
            provide a positive return.
        </p>
        <p class="mb-2"><a name="BondPrices" /></p>
        <h4 class="text-xl font-bold my-2">Bond Prices</h4>
        <p class="mb-2">
            There are two primary reasons why bond prices fluctuate, and why you
            might not get back the full amount of the principal you paid to buy
            a bond if you have to sell before the bond matures.
        </p>
        <p class="mb-2">
            The first reason is that people change their expectations about the
            ability of the bond's issuer—the company, government or agency that
            borrowed the money—to meet its obligations to pay interest and/or
            repay the principal. The more worried they are, the less willing
            they will be to pay for the bond. The increased risk investors take
            when they buy low-rated bonds also explains why these bonds
            typically pay a higher rate of interest than bonds that are highly
            rated.
        </p>
        <p class="mb-2">
            The second reason is changing interest rates. If interest rates go
            up, the price of existing bonds, including the ones you hold, goes
            down. But if interest rates go down, the price of existing bonds
            will go up.
        </p>
        <p class="mb-2">Some examples of bond fluctuations:</p>
        <p class="mb-2">
            Suppose you spent $1,000 for a bond paying 5.75% interest, or $57.50
            a year. That interest is fixed for the term of the loan.
        </p>
        <p class="mb-2">
            If the interest rates go up to 6%, investors won't be interested in
            bonds on which they'll earn less than 6%. But they will be willing
            to pay less than the face value, or the $1,000 you spent for the
            bond you own. Specifically, they'll pay enough less—in this case
            $958.33—so that the $57.50 they receive as interest equals the going
            rate of 6%.
        </p>
        <p class="mb-2">
            To find the current price of a bond with a fixed interest payment,
            use the following formula:
        </p>
        <p class="mb-2">Bond Price X Fixed Interest Rate = Annual Interest</p>
        <p class="mb-2">In our example: $1,000 X 5.75% = $57.50</p>
        <p class="mb-2">
            Now, if interest rates rise to 6%, the value of the bond which pays
            annual interest of $57.50 is:
        </p>
        <p class="mb-2">Bond Price X 6.00% = $57.50</p>
        <p class="mb-2">Bond Price = $57.50/0.06 = $958.33</p>
        <p class="mb-2">
            If on the other hand, rates fall, let's say, to 5%, the following
            will happen
        </p>
        <p class="mb-2">Bond Price X 5.00% = $57.50</p>
        <p class="mb-2">Bond Price = $57.50/0.05 = $1,150.00</p>
        <p class="mb-2"><a name="Yield" /></p>
        <h4 class="text-xl font-bold my-2">Yield</h4>
        <p class="mb-2">
            Whatever price investors pay for a bond—its face value at the time
            it is issued, a discounted price when interest rates on new bond
            increase, or a premium price when interest rates drop—the amount
            that's repaid at maturity is the face value, typically $1,000.
        </p>
        <p class="mb-2">
            For example, whether you pay $958, $1,000 or $1,150 in the bond
            market, you will get back $1,000 if you own the bond when it comes
            due. You have to take that situation into account if you are
            considering buying bonds after they are issued. Specifically what
            you want to know is the bond's "Yield to Maturity," which factors in
            the amount of time left in the bond's term as a way to evaluate what
            you will earn on your investment.
        </p>
        <p class="mb-2">
            "Yield to Maturity" measures the annual rate of return an investor
            will receive from both the interest to be paid and any appreciation
            or depreciation expected when the bond matures (is paid off).
        </p>
        <p class="mb-2">
            Those figures are available from your investment advisor and, for
            certain bonds, available from financial news sources.&nbsp;
        </p>
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